Statement on the Establishment of the Deposit Liquidation Board.

There will be established in the Reconstruction Finance Corporation a special Division to make loans to closed banks. The head of this Division will be C. B. Merriam, a member of the Board of Directors of the Corporation.

In order that this Division may work in close cooperation with the Treasury Department, the Comptroller of the Currency and the Deposit Insurance Corporation it will be administered by a Deposit Liquidation Board consisting of the following:

1. C. B. Merriam, the head of the Deposit Liquidation Board

2. Jesse H. Jones, Chairman of the Board of the Reconstruction Finance Corporation

3. Dean G. Acheson, Under Secretary of the Treasury

4. Lewis W. Douglas, Director of the Budget

5. J.F. T. O'Connor, Comptroller of the Currency

6. Walter J. Cummings, Chairman of the Deposit Insurance Corporation

The purpose of the Deposit Liquidation Division will be to stimulate and encourage liquidating agents of banks closed after January 1, 1933, to borrow from the Reconstruction Finance Corporation in order that funds may be made available to depositors as quickly as possible. The general intention is to make loans on the assets of closed banks for the benefit of depositors up to a maximum of 50 percent of their deposits, inclusive of distributions heretofore made. This does not, of course, mean that in a bank whose remaining assets are worth less, that the depositors will get 50 percent. They will get in such a case only their share in the remaining assets. It is not intended that such distribution will be uniform but that they will be limited to the orderly liquidation value of assets on which loans can be made, reserving only what will appear sufficient to pay taxes, expenses and interest during the liquidation period. In some cases further distributions will not be possible because assets remaining in the bank will not warrant any further dividends than those heretofore made. Distributions in any case will be possible only to the amounts of the loanable value of the assets which have not already been pledged or otherwise disposed of. In cases where the condition of the closed bank will justify it, proper consideration will be given to a larger distribution than 50 percent. More than one distribution will be made as and if assets improve in value.

The object of establishing this Deposit Liquidation Division and trying to stimulate the distribution of frozen bank assets is: First, to place money in the hands of depositors with the least possible delay, and second, to bring about more orderly liquidation of the assets of closed banks; this will prevent dumping of assets at sacrifice prices.

Special advisory and appraisal committees will be organized throughout the country to speed the appraisal of closed bank assets where such appraisals have not already been made by Government agencies. These committees organized for the appraisal and recommendation of these loans will be recruited from representative local bankers, business men, and farmers.

It is estimated that the maximum available loanable value of the assets of banks closed during the year 1933 will not exceed $1,000,000,000 (one billion dollars), and it is hoped that the distribution will approximate that amount. The exact amount that can be distributed will be governed by the appraisal of the actual assets of each closed bank. Until that appraisal is made the amount involved cannot be more accurately stated.

Funds for the liquidation of deposits will be supplied by the Reconstruction Finance Corporation. These funds may be supplemented later by the Federal Deposit Insurance Corporation.

I am particularly anxious that this matter be handled with dispatch and to that end solicit the cooperation of all who may have official or other authority in connection with any closed bank. The United States Government has authority over closed national banks and can speed up distribution in those banks if those directly interested will cooperate, but the Government is without authority over closed State banks. If delays occur in the case of State banks, they will be due to reasons beyond the control of the national Government.